The Wholesale inflation declined to a five-month low of 6.16 percent in the month of December 2013. This was revealed by the Wholesale Price Index (WPI) data released by the Office of Economic Adviser, Union Ministry of Commerce, on 14 January 2014.
The decline in WPI-based inflation was on account of decline in vegetable prices. Vegetable prices declined by nearly 30 percent in December 2013.
In December 2013, prices of primary group articles were down 5 per cent. Primary group includes food articles, non food articles and minerals. The prices food articles, non food articles and minerals declined by 6.4 percent, 0.4 percent and 3.1 respectively.
The decline in wholesale inflation is noticeable because it has come on the back of decline in consumer retail inflation to 9.87 percent in December 2013. This has raised hopes among the industrial quarters that RBI will now hopefully reduce the policy rates in its 28 January 2014 review so as to pull up economic growth.
However, higher core inflation is a worry and may weigh highly in the RBI’s decision on whether to reduce the policy rate or keep it unchanged. Core inflation is considered to be more stable and important from policy viewpoint. This is because it does not include the food and fuel inflation as they are volatile in nature.
Whole Sale Price Index
Whole Sale Price Index (WPI) is the weighted average of all the items included in the construction of WPI. It is an index that measures and tracks the changes in price of goods before the retail level. It is also known as headline inflation.
The base year for WPI is 2004 and includes 676 items (primary, fuel &power and manufactured products).